WIKI · 41 TERMS

Options glossaryThe key terms, in plain words.

What does IV rank mean? Where does the stop-loss go? Here you’ll find every metric the Options Trader Pro Screener uses, plus the key basics for stock traders: what they mean and how to use them.

WHY A SCORE?

One indicator can be wrong. Six at once less often.

A single indicator is easy to read and easy to fool. RSI says “oversold” in the middle of a crash, a perfect trend runs straight into earnings, a cheap-looking chart comes with an investigation in the headlines. That’s why experienced traders check many things before they buy an option. The score runs that same check for every stock, the same way every time.

TrendMomentumTrend strengthVolatilityDatesNews

01Many signals, one answer

Trend, momentum, trend strength, volatility, dates and news are combined. Each block can add points, cost points or cap the score.

02The same rules every time

No mood, no FOMO: a 4 on Monday means the same as a 4 on Friday. That makes your decisions comparable, in hindsight too.

03Comparable across 120+ stocks

Instead of opening 120 charts, you start with the few setups where most factors line up.

04Transparent, not a black box

Every score comes with its reasons: “EMA bullish”, “IV cheap”, “⚠ Earnings in 9d”. You can check every point and disagree.

05Caps protect you

Some risks can’t be outweighed: critical news caps at 2, expensive IV caps long options at 3, earnings inside the holding window block short-term trades.

How to read the score

5A+All key factors line up, no warnings.

4AStrong setup with minor drawbacks.

3BUsable, but with clear drawbacks. Check it yourself.

1–2CNo clear setup or a hard warning → WAIT.

What the score is not

Not a probability of profit and not a guarantee. A high score means the conditions the rules look for are present right now. The market can still go the other way. Position size, stop and the decision stay with you.

Score & signals

Score (1–5)#

safety, grade A+ to C

The overall rating of a setup: how many of the rules that matter when buying an option are met right now? And are there warnings against it? 5 means all key factors point the same way and nothing warns. 1–2 means no clear setup or a hard warning.

In the screenerCalculated separately for every stock and each horizon (swing and short-term) and shown with a grade: 5 = A+, 4 = A, 3 = B, 1–2 = C. The reasons are always listed next to the score, e.g. “EMA bullish”, “IV cheap” or “⚠ Earnings in 9d”.

LONG CALL · LONG PUT · WAIT#

signal, direction, example setup

The direction of the rule-based example setup. LONG CALL bets on rising prices, LONG PUT on falling prices. WAIT means the picture is unclear or a risk outweighs the setup. No trade is a decision too.

In the screenerThe screener's example setups are always long calls or puts, never short options, so the risk is limited to the premium paid. A WAIT signal has a score of 2 at most.

More on LONG CALL · LONG PUT · WAIT →

Swing vs. short-term#

horizon, holding period

How long you plan to hold a position changes which signals matter. A swing trade needs an established trend; a short trade mostly needs momentum.

In the screenerSwing: hold about 10–20 trading days, expiry 30–45 days out, at-the-money strike. Short-term: hold 1–5 trading days, the next Friday expiry with at least 14 days left (14–18 DTE), strike slightly in the money. Short-term weighs momentum and volume more and ignores the long-term EMA200 filter. One click in the app switches between them.

Target & stop#

take profit, stop loss, exit

Deciding before the entry when you take profits and when you get out is the best protection against gut decisions in the middle of a trade.

In the screenerFor the stock, the target is the expected move over the holding window (see expected move). For the option: take profits at +50% on the premium paid (swing) or +35% (short-term), stop at −50% of the option price, a partial loss rather than a total loss.

Fade (counter move)#

mean reversion, exhaustion

A trade against an overstretched move: the price has run too far, too fast and shows the first signs of exhaustion. Trading against the trend is riskier than trading with it.

In the screenerShort-term horizon only, and only when three things line up: RSI at an extreme, price outside the Bollinger band, and momentum already turning (MACD histogram). Starting score 3; volume and a matching RSI divergence can raise it, a very strong trend (ADX ≥ 35) costs a point. Tight stop, 5 trading days max.

Post-shock reversal#

gap, crash, spike

After a single extreme day, such as a crash after a headline, a counter move often follows. Buying on the shock day itself, though, means catching a falling knife.

In the screenerDays with a move of ≥ 5% or ≥ 2.5 × ATR are detected. A signal comes 1–3 days later at the earliest, and only with confirmation (close above the prior day’s high or below its low). Expiry 10–15 days, strike about 2% in the money, score 3 at most. If the shock came right after earnings, it is capped at 2 (see PEAD).

Trend & momentum

EMA (20 / 50 / 200)#

exponential moving average, EMA trend

A moving average that weights recent prices more heavily. Price above the EMA20 and the EMA20 above the EMA50 means the short-term trend is up (EMA stack), the reverse means down. The EMA200 shows the long-term picture.

In the screenerThe EMA stack is the basis of every trend signal. In the swing horizon, a call below the EMA200 or a put above it costs one point.

MACD (12 / 26 / 9)#

MACD histogram, momentum

The difference between two EMAs (12 and 26 days) and its signal line (9 days). MACD above the signal line means the upward move is gaining momentum. The histogram shows whether that momentum is growing or fading.

In the screenerConfirms the trend direction. A histogram rising three days in a row earns a bonus; running against the signal costs a point (two in the short-term horizon). If MACD and EMA disagree, the screener waits or deducts.

ADX (14)#

average directional index, trend strength

Measures how strong a trend is, not which direction it goes. Below 20 a market is considered directionless; from 25 it is clearly trending.

In the screenerA gate for directional trades: below ADX 20 (short-term: 14) there is no swing signal, even if EMA and MACD agree. From 25 the trend counts as a plus.

RSI (14)#

relative strength index, overbought, oversold

Compares the strength of up days and down days on a scale of 0 to 100. Classically, above 70 is overbought and below 30 oversold. In strong trends, though, RSI can stay at an extreme for a long time.

In the screenerThresholds at 72 (overbought) and 28 (oversold). Buying a call into an overbought market costs two points, because the setup often looks better than it is.

RSI divergence#

bearish / bullish divergence

Price makes a new high but RSI doesn’t: the rally is losing strength underneath (bearish divergence). The mirror image at lows is a bullish divergence. Often an early warning sign.

In the screenerA divergence against the signal costs two points. For fade and reversal signals, a divergence in the same direction confirms the turn and adds a point.

Bollinger Bands (20, 2σ)#

A band two standard deviations around the 20-day average. A close outside the band shows the price is statistically stretched.

In the screenerA call above the upper band or a put below the lower band costs a point. For fade signals the stretch is a requirement.

Volume ratio#

relative volume

Volume of the last completed trading day compared with the average of the 20 days before it. High volume shows that many market participants are behind a move.

In the screenerAbove 1.5× in the direction of the signal earns a bonus point; clearly below-average volume costs one. The last completed candle is used on purpose, because half a trading day would push the ratio down artificially.

ATR (14)#

average true range

The average daily trading range of a stock in dollars. It shows what a “normal” day looks like for this stock.

In the screenerUsed to detect shock days: a day counts as extreme if it moves at least 5% or 2.5 times the ATR.

Stock trading

Spotting a trend#

uptrend, downtrend, higher highs

An uptrend is a series of higher highs and higher lows, a downtrend a series of lower highs and lower lows. In between is the sideways phase, where highs and lows do not shift clearly.

In the screenerThe screener sums up the trend as ▲ UP, ▼ DN or → FL (flat), derived from the EMA stack, plus trend strength via ADX: from 25 a trend counts as clear.

Support & resistance#

support, resistance, key levels

Support is a price area where buyers were recently strong enough to stop a decline. Resistance is an area where sellers stopped a rise. The more often a level holds, the more market participants watch it.

In the screenerThe screener calculates support and resistance as the low and high of the last 50 trading days and uses them in its analysis.

Golden cross & death cross#

EMA 50 / 200 crossover

A golden cross happens when the 50-day average crosses above the 200-day average, a death cross when it crosses below. Both mark a change in the medium-term trend, but with a clear delay.

In the screenerThe screener does not wait for the cross itself. It checks the order of price, EMA20 and EMA50 and the position relative to the EMA200 every day; in the swing horizon a call below the EMA200 costs one point.

Breakout & pullback#

breakout, pullback, retest

A breakout is a close above resistance or below support, ideally on higher volume. A pullback is the return of price to the broken level, which then often switches roles: former resistance becomes support.

In the screenerTrend setups in the screener follow the trend direction. Fade setups trade a stretch beyond the Bollinger Bands back towards the average, reversal setups the counter move after a shock day.

Price gap#

gap up, gap down, opening gap

A gap appears when a stock opens clearly above the previous day's high or below its low, usually after news outside trading hours such as earnings. On the chart an empty area remains between the two days.

In the screenerA day with a move of at least 5 % or 2.5 times the ATR counts as a shock day. If it comes with earnings, the screener treats it as a fundamental repricing and caps reversal signals at a score of 2.

Stop-loss#

stop, ATR stop, trailing stop

A stop-loss defines in advance at which price a position is closed if the trade does not work. It limits the loss and takes the decision out of the moment when emotions are strongest.

In the screenerFor options the screener uses a stop on the premium (−50 %) and a time exit at 7 DTE. For reversal setups the low of the shock day marks the level below which the setup is invalidated.

Risk-reward ratio#

R:R, reward to risk

The risk-reward ratio compares the possible gain up to the target with the possible loss down to the stop. A ratio of 3 means three dollars of possible gain for every dollar at risk.

In the screenerFor option setups the screener sets target and stop as fixed percentages of the premium, for example +50 % and −50 %. Measured on the premium, the ratio is about 1 to 1, plus the time exit.

Position size#

position sizing, 1 % rule

Position size decides how many shares or contracts you buy. A common approach is to derive it from risk: how much of the account may be lost if the stop is hit?

In the screenerThe screener does not size positions; it shows one example setup per symbol. How much you commit is your decision, which is also why the setups are not recommendations.

Volatility

Implied volatility (IV)#

The fluctuation the market expects in the future, read from option prices and annualised. High IV means options are expensive because large moves are priced in.

In the screenerThe basis for the premium estimate and the expected move. If the data source provides no IV, the screener uses historical volatility and marks it “~ IV from HV20”.

Historical volatility (HV20)#

realised volatility

How much the price actually moved over the last 20 trading days, annualised. That is the look back, IV is the look forward.

In the screenerThe benchmark for IV (see IV/HV) and the fallback when no IV is available.

More on Historical volatility (HV20) →

IV rank (IVR)#

implied volatility rank

Shows where today’s IV sits between its one-year low (0) and high (100). An IVR of 20 means options on this stock are relatively cheap right now, whether 30% IV is a lot or a little in absolute terms.

In the screenerBelow 35, IV counts as cheap, which is good for buyers. Above 50 it is expensive: long options then get a score of 3 at most, because you pay a premium and risk an IV crush. The screener builds the IV history on your computer from the first launch (one value per day); until 10 days are available it shows “IVR building” and IVR is not used yet.

IV percentile (IV %)#

IVP

The share of days over the past year on which IV was lower than today. More robust than IV rank when there were single outlier days.

In the screenerShown next to IV rank so you can tell whether a high IVR is only caused by a single outlier.

VRP · IV/HV ratio#

volatility risk premium

The ratio of expected (IV) to actual fluctuation (HV). Above 1, options price in more movement than has happened recently. Buyers pay a premium for uncertainty.

In the screenerShown in the volatility block. After a shock day, an IV/HV above 1.3 costs a point: a panic premium is still priced in.

IV crush#

volatility crush

The rapid drop in IV after an expected event, typically right after earnings. A long option can lose value even though the stock moves in the right direction.

In the screenerThe main reason earnings inside the holding window cost points or block a short-term trade entirely, and why expensive IV caps the score at 3.

Expected move#

1σ move

The move the options market prices in for a period: price × IV × √(days / 252). Example: stock at $200, IV 30%, 25 trading days → roughly ± $19.

In the screenerSets the stock’s price target for the holding window and helps put strikes into context.

Option basics

Call & put#

call option, put option

A call gives the right to buy 100 shares at the strike until expiry. It gains when the price rises. A put gives the right to sell. It gains when the price falls. As a buyer, the most you can lose is the premium paid.

In the screenerThe screener's example setups are only long calls (LONG CALL) and long puts (LONG PUT).

Strike · ATM / ITM / OTM#

strike price, at / in / out of the money

The price at which the option can be exercised. At the money (ATM): strike ≈ price. In the money (ITM): the option already has intrinsic value. Out of the money (OTM): cheaper, but needs a bigger move.

In the screenerSwing: at the money (delta about 0.5). Short-term: slightly in the money (delta about 0.6) so a short move has more impact. Reversal: about 2% in the money (less time value, less IV risk).

Delta#

How much the option price changes when the stock rises by $1. A call with delta 0.5 gains about $0.50 per share, i.e. $50 per contract. Roughly also a measure of how likely the option is to finish in the money.

In the screenerDrives the strike choice per horizon (see strike).

Theta#

time decay, Θ

How much value an option loses per day purely through the passage of time. Decay speeds up sharply in the final weeks before expiry.

In the screenerThat’s why the screener never picks very short expiries: even short-term trades get at least 14 days to expiry so there is enough time value left at the exit.

Vega#

IV sensitivity

How much the option price changes when IV rises or falls by one percentage point. Longer expiries have more vega.

In the screenerExplains why an IV crush hurts long options and why expensive IV limits the score.

DTE · expiry#

days to expiration

The days until the option expires. More time costs more, but gives the idea time to work and loses less value per day.

In the screenerSwing: 30–45 DTE. Short-term: 14–18 DTE (the next Friday expiry with at least 14 days left). Reversal: 10–15 DTE.

Premium · breakeven#

option price, break-even point

The premium is the price of the option (per share, times 100 per contract). Breakeven is the price at which the trade makes money at expiry: strike + premium for a call, strike − premium for a put.

In the screenerThe premium is estimated from price, strike, time to expiry and IV (Black-Scholes). Real quotes differ, so check bid and ask with your broker before ordering; a wide spread costs you directly.

Dates & news

Earnings#

quarterly results, earnings date

The date a company reports its numbers. IV rises beforehand and often collapses right after, and the price can jump either way. A coin flip at a premium.

In the screenerEarnings within the next 14 days cost two points. In the short-term horizon, earnings within 7 days mean no signal (WAIT). The next date is shown in the “Dates” block.

Ex-dividend date#

ex-date

On the ex-date the dividend is deducted from the price, so the stock opens lower by about that amount. Calls lose, puts gain; just before it, a call can be exercised early.

In the screenerShown in the “Dates” block so you have it in view when choosing an expiry.

PEAD#

post-earnings announcement drift

A well-documented market effect: after an earnings surprise the price often keeps drifting in the same direction for days or weeks instead of coming back.

In the screenerIf a price shock happened within 5 days of earnings, it counts as a fundamental repricing: reversal signals are capped at a score of 2.

News tone#

headline sentiment

Whether the latest headlines about a stock are mostly positive (e.g. beat, upgrade) or negative (miss, downgrade, lawsuit). News often explains why a chart moves.

In the screenerThe screener reads the headlines of the last 7 days (in English), refreshed every 30 minutes. The last 5 days count towards the score: if two or more headlines outweigh in the signal’s direction it’s +1, against it −1. The same story from several outlets counts once; ETFs and funds are excluded.

Red flag 🔴#

critical headline, headline risk

Headlines about investigations, fraud allegations, accounting problems, regulators, going-concern issues or sudden leadership changes. Such situations are unresolved and can be settled at any moment with a gap in either direction.

In the screenerA red flag within the last 5 days caps calls and puts at a score of 2, however good the chart looks. The signal stays visible, with the headline and a link to the source next to it.

Every metric live, for 120+ stocks at once.

Try the interactive demo or get started right away. The first month is free, cancel anytime.

Start free Try the live demo